ESG Principles & Regulatory Frameworks Flashcards

Which of the following correctly describes the relationship between the GRI Standards and the SASB Standards?

Answer: GRI focuses on broad stakeholder impacts while SASB focuses on industry-specific financial materiality for investors

GRI is stakeholder-oriented, addressing a company's impacts on society and the environment, while SASB is investor-oriented, focusing on financially material ESG topics by industry.

The UN Guiding Principles on Business and Human Rights (UNGPs) are built on which three foundational pillars?

Answer: Protect, Respect, and Remedy

The UNGPs rest on three pillars: the state's duty to Protect human rights, corporations' responsibility to Respect human rights, and the need for access to Remedy when rights are violated.

Which concept in ESG governance refers to a board's responsibility to oversee the long-term sustainability strategy and ensure it aligns with stakeholder interests beyond shareholders?

Answer: Stakeholder capitalism

Stakeholder capitalism holds that corporations should create value for all stakeholders—employees, customers, communities, and the environment—not solely maximize shareholder returns.

Under the TCFD framework, which category addresses how climate-related risks and opportunities have affected or may affect a company's businesses, strategy, and financial planning?

Answer: Strategy

TCFD's Strategy pillar requires disclosure of the actual and potential impacts of climate-related risks and opportunities on an organization's businesses, strategy, and financial planning.

The concept of 'stranded assets' in ESG risk analysis most commonly refers to which scenario?

Answer: Fossil fuel reserves or infrastructure that may lose economic value before end of expected life due to energy transition

Stranded assets are fossil fuel reserves and related infrastructure that may become economically unviable or unusable before the end of their expected life as the world transitions to cleaner energy.

The Principles for Responsible Investment (PRI), launched with UN backing in 2006, requires signatories to do which of the following?

Answer: Incorporate ESG factors into investment analysis and decision-making processes

PRI signatories commit to six principles, with the core commitment being to incorporate ESG factors into investment analysis and ownership decisions.

Which term describes the risk that a company's assets, earnings, or reputation are damaged due to shifts in climate policy, legal liability, or changing market preferences, as distinct from physical climate risks?

Answer: Transition risk

Transition risk refers to financial risks arising from the shift to a lower-carbon economy, including policy changes, technological disruption, and market sentiment changes.